| In the field of research in economics,the study on the correlative mechanism between monetary policy and inflation has always been the research emphasis of this field.Wherein,the McCallum Rule and Taylor Rule lay a solid theoretical foundation for related research in this field,and have a very important position in the framework of monetary policy for countries.In addition,with the emergence of the new monetary policy tools in recent years,the effectiveness of diverse monetary policy tools for the regulation and control of inflation has increasingly become the focus of academic and policy makers.Especially since our country entered into the "new normal" period,CPI and PPI continues to linger at a low level,the economy faces the risk of the outbreak of deflation.The central bank of our country takes the quantitative monetary policy tools,such as SLF,MLF and the regulation of foreign exchange reserves,while it takes price monetary policy tools;for instance,RRR cuts and adjusting the level of interest rate,but neither of the monetary policy significantly enhance the level of our country’s current inflation.At present,the research on the correlative mechanism between monetary policy and inflation is mostly based on CPI as the proxy variable of inflation.However,there has been a growing body of research demonstrating that CPI cannot effectively measure the current level of inflation,which is mainly because the CPI is vulnerable to certain temporary shocks and appears short-term fluctuation.Using CPI as a proxy for inflation,on one hand,the research on the correlative mechanism between monetary policy and inflation will not be able to carry out a convincing research result,on the other hand,it will seriously weaken the effectiveness of monetary policy on inflation.Then,whether or not there is a structural change of the correlative mechanism between monetary policy and inflation? What kind of monetary policy tools can alleviate the dilemma that our country faces? How to effectively measure the level of inflation in our coutry? Considering this,this article will reexamine the correlative mechanism between monetary policy and inflation,and mainly made the following important conclusions:The Chapter One is the introduction part,which mainly make a systematical introduction of the relevant content of this article.In this chapter,we demonstrate the raise of the question and the research significance of this article,then give a brief introduction and carding of diverse monetary policy rules,and sort out the correlation theory and empirical research of the correlative mechanism between monetary policy and inflation.At last,this chapter gives the research framework of this article.The Chapter Two mainly takes a further study on the linear characteristics and nonlinear characteristics of the McCallum Rule and Taylor Rule.The results show that the linear McCallum rule and the linear Taylor rule are capable of regulating the inflation effectively.But for the linear McCallum rule,the money supply is not valid for the regulation of output while for the linear Taylor rule,the nominal interest rate for the regulation of the output is effective.For the nonlinear of the McCallum rules and the nonlinear Taylor rule,both of the monetary policy rules have significant characteristics of regime switching.The macroeconomic regulation and control effect of McCallum rules and Taylor rules in the economic fluctuation is significantly better than that in the stable operation of the economy,and both of the monetary policy rules have strong stability in the low volatility regime.Although it is a general trend that the central bank of our country has gradually changed from the McCallum rule to the Taylor rule,but on the one hand macroeconomic regulation based on the McCallum rule still has certain regulation effect,on the other hand our country still does not have the favorable conditions for taking full use of Taylor rules of regulation in the current.Therefore,our country still uses both of the McCallum rules and the Taylor rules of macroeconomic regulation and control.The Chapter Three of this article continues the idea of Chapter Two,selects mixed-frequency data to explore the effectiveness of diverse monetary policy on regulating inflation,and contrasts the mixed frequency data model with the traditional model on accuracy,which provide new methods and ideas for this field.The results show that,on the one hand the regulation of the money supply has a certain time lag,and the money supply sustains over a long period of time.But the interest rate can respond promptly to the volatility of inflation,solve the problems of inflation timely.In this regard,the interest rate has a better effect of short-term inflation regulation than the money supply.On the other hand,mixed frequency data model can keep the information contained in the original data more effectively than the traditional model in the estimation process,improve the validity and stability of the final estimation,and provides effective factual evidence for the central bank of our country to achieve precise regulation of inflation.The Chapter Four investigate the nexus between foreign exchange reserves and inflation in the open economy.As one of the quantitative monetary policy,the importance of foreign exchange reserve is self-evident.In recent years,with the deepening of our country’s reform and opening up,as well as the continued reduction in the total amount of foreign exchange reserves,the impact of foreign exchange reserves on China’s current inflation has attracted more and more attention from the outside world.Therefore,based on the above perspective,this chapter uses the threshold model and the state space model with time-varying parameters to study the nonlinear correlative mechanism and the time-varying characteristics of China’s foreign exchange reserves and inflation.The results show that both of the economic growth and inflation have significant threshold effect on the nexus between foreign exchange reserves and inflation.The growth of foreign exchange reserves in China has a significant effect on inflation when the economy is in a boom period and will not have a significant impact on the level of inflation when the economy is in a period of austerity.In addition,the impact of foreign exchange reserve growth rate on inflation when the inflation level is high is significantly higher than that when the inflation level is low.Therefore,the current structural behavior of the central bank reserve is line with the macropolicy’s expectations of the capital adjustment,stimulating demands,maintaining the stability of the RMB exchange rate,and has limited effects on the current low levels of price level in our country.However,the decline in foreign exchange reserves determines that the devaluation of the RMB is still expected to exist objectively,which means that the overall trend of international capital to withdraw from China in the short term will not change.Therefore,even if China has a huge foreign exchange reserves,the use of it still need to be cautious.The Chapter Five clearly points out that using CPI as a proxy for inflation has some defects to a certain extent on the basis of the above,and uses the dynamic factor model based on the 8 indexes of the CPI basket to build the core inflation of our country and evaluates the core inflation.The results show that the core inflation which we built has strong stability,and can remove the CPI fluctuation components effectively.The core inflation has less increases and rising speed than CPI,and has a strong ability of withstanding external shocks.In addition,in some time the core inflation moves before CPI moves,which reflects the strong predictability.At present,our country is facing the risk of all-out deflation,which is not caused by sudden external shocks.The reason why the price level is low is economic restructuring.In addition,due to the macro policy of reform of the supply front which our country implement,coupled with the global economic recovery is still grim,our country will still maintain this phenomenon of a low level of inflation in the next period of time.The Chapter Six,based on the core inflation index built in the Chapter Five,uses the TVP-VAR model to explore the dynamic reaction path between monetary policy and core inflation.The results show that the money supply,nominal interest rate and foreign exchange reserve have significant time-varying effects on the regulation of core inflation.However,money supply,nominal interest rate and foreign exchange reserves have some differences in the regulation effect.As a representative of the quantitative monetary policy tools,money supply and foreign exchange reserves have similar effect of regulation on the core inflation,and the effect has the characteristics of quick response and strong reaction.Yet,due to its characteristics of fast response and strong regulation,its actual result is likely inconsistent with what we expected in in the actual operation.Especially the money supply,although it can significantly improve the level of core inflation in the early period of the policy enforceme,it will have a certain degree of inhibition on the level of core inflation when the policy is implemented for a certain period of time.The impact of nominal interest rate on core inflation has a considerable degree of stability,and the impact of interest rate shocks on the level of core inflation is similar in different economic stages.That is to say,no matter what stages our country is,the impact of interest rate channel on core inflation level has no structural change,and as a monetary policy intermediary tool,the interest rate channel has some degree of stability.This chapter argues that although quantitative monetary policy is better than price monetary policy for the regulation effect of core inflation,the price monetary policy compared to quantitative monetary policy correspond the central bank’s macro policy objectives of ‘stabilize growth,readjust the structure and deepen reform’ to to a higher degree.Therefore,the price monetary policy is more suitable for China’s central bank as the main means of macroeconomic regulation and control. |
